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Sell TataTeleservice; target of Rs 17: HDFC Securities
HDFC Securities is bearish on TataTeleservice and has recommended sell rating on the stock with a target of Rs 17 in its September 20, 2010 research report.
HDFC Securities is bearish on Tata Teleservices (Maharashtra) and has recommended sell rating on the stock with a target of Rs 17 in its September 20, 2010 research report.
"Tata Teleservices (Maharashtra) (TTML) enjoys high composition of VAS revenues at 19% in 1QFY11 against 11-12% for the industry. A large proportion of TTML's VAS revenue is from data cards (Tata Photon+) which has been growing at a fast pace. This could come under pressure post launch of 3G services by competitors. Also, high debtor days at 47 against industry average of 11- 12 reveals high component of postpaid revenues (60-70% against 25-30% for peers) and this exposes TTML to tariff decline in postpaid segment post MNP. is currently trading at 17.8x and 12.6x FY11 and FY12E EV/EBITDA."
"At our target price of Rs 17, TTML would trade at an implied EV/EBITDA multiple of 10.8x FY12E, 30% premium to implied EV/EBITDA multiple of Bharti/Idea. Better than expected capital allocation through vendor financing, equity fund raising at premium to current market price or phenomenal turnaround in operational performance provides upside risk to our target price," says HDFC Securities research report.
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